The latest on California politics and government

August 24, 2011

It isn't often that a constitutional officer shows up at the Legislature's audit committee to pitch for an audit.

State Treasurer Bill Lockyer did just that today. He left with a narrow win, but only after agreeing to have one of the entities he controls subjected to similar scrutiny.

Lockyer and Assemblyman Mike Feuer, D-Los Angeles, pushed for state Auditor Elaine Howle to examine two bond-issuing joint powers authorities that they believe are operating with a conflict of interest and an unacceptably low level of transparency.

"There's been nothing but stonewalling from these particular JPA entities," said Lockyer, referring to the California Statewide Communities Development Authority and the California Municipal Finance Authority. "You kind of have to ask, why is so much energy going into 'don't look at us...'? My view is what we have is a private business operating as a public entity."

Specifically, the two Democrats said they are concerned that the agencies, which serve as "conduit financiers" between hundreds of local public agencies and investors, make project financing decisions upon recommendations from the private companies that serve as their staff. The companies are paid based on the tax-exempt bonds issued by the authorities, which Feuer and Lockyer said poses a conflict.

They want Howle to look at, among other things, how the agencies' way of doing business, the fees they collect and the public benefit of the projects they approve compare with other similar agencies.

Lobbyist Gene Erbin, representing the CSCDA, told the committee that the audit should be far broader to examine other similar "conduit financiers."

"We think this targets us," Erbin said. "This is singular in nature. ...There's a predisposition that there's something wrong here. The mere assertion is damaging in the market place and promotes a competitive advantage."

Erbin said the agency had but one default in 23 years of operation, has financed hundreds of projects that benefit the public and has been held out as highly qualified by the Legislature.

Even some of Lockyer and Feuer's fellow Democrats on the Joint Legislative Audit Committee were hesitant to support the audit. It won approval by the bare minimum number of members, but only after Lockyer agreed to have one of the financing agencies under the treasurer's purview scrutinized in the same audit.

Stay tuned. Howle said the audit should be done in six to seven months.